'Honest concurrent use' victory for Budvar in latest BUDWEISER battle

Budejovicky Budvar Narodni Podnik and Anheuser-Busch Inc have both sold beer under the BUDWEISER mark for many years. The long-running dispute between these two companies for control of the BUDWEISER mark has kept lawyers busy and observers entertained for a number of years.

In the latest chapter in this dispute, Budejovicky Budvar Narodni Podnik v Anheuser-Busch Inc ([2012] EWCA Civ 880, July 3 2012), the Court of Appeal of England and Wales has unanimously allowed an appeal by Czech brewer Budvar against the High Court's grant of a declaration of invalidity of its BUDWEISER mark. The decision clarifies the ruling of the Court of Justice of the European Union (ECJ) on the application of the 'honest concurrent use' defence in invalidity proceedings.

Both Czech brewer Budvar and US brewer Anheuser-Busch have marketed their products under the BUDWEISER name since 1973 and 1974, respectively, and are the registered proprietors of BUDWEISER marks in the United Kingdom. In 2005 Anheuser-Busch successfully obtained a declaration that Budvar's BUDWEISER mark was invalid pursuant to Article 4(1)(a) of the First Trademarks Directive (89/104/EEC) (now superseded by the Trademarks Directive (2008/95/EC)). Article 4(1)(a) of the directive reads as follows:

"A trademark shall... be declared invalid if it is identical with an earlier trademark, and the goods or services for which the trademark… is registered are identical with the goods or services for which the earlier trademark is protected."

The present case followed a referral to the ECJ in which the latter had decided that the proprietor of an earlier trademark could not obtain cancellation of an identical later trademark designating identical goods under Article 4(1)(a) of the directive where there had been long-standing, honest concurrent use of those two marks, and use of the later mark did not have an adverse effect on the essential function of the earlier mark. This left the Court of Appeal to answer three related questions:

1. Was Budvar entitled to rely upon the honest concurrent use defence for the first time before an appeal court?
2. If so, did the existing evidence show an adverse effect on the essential function of Anheuser-Busch's mark?
3. If not, would it be unfair or unjust to resolve the appeal without providing Anheuser-Busch with the opportunity to prove adverse effect?

The court held that Budvar could introduce the honest concurrent use defence on appeal, as the court would simply be considering whether, on the facts, a case had been made out as a matter of law. This caused no injustice to Anheuser-Busch.

The court then held that the existing evidence that had been submitted by Anheuser-Busch did not establish that use of Budvar's mark had an adverse effect on the essential function of its own earlier mark. In support of this, the court pointed to the fact that the two brands had co-existed for decades with different get-ups, prices and taste and during this time both had achieved substantial sales figures.

The court rejected Anheuser-Busch's argument that the ECJ ruling should be interpreted as meaning that honest concurrent use could be relied upon only in cases involving de minimis levels of confusion. The court recognised that the ECJ had not said that this was how it intended its ruling to be interpreted when it could have done so.

Finally, the court decided that resolving the appeal without providing Anheuser-Busch with the opportunity to prove adverse effect would not be unfair or unjust. Anheuser-Busch argued that it had not submitted any evidence of adverse effect because Budvar had not pleaded honest concurrent use and its own case was pleaded under Article 4(1)(a) of the directive, which did not require evidence of confusion. The court said that Budvar's reference in its pleadings to earlier Court of Appeal decisions which confirmed the state of honest concurrent use between the parties made it clear that honest concurrence use, though not expressly pleaded, was an issue.

Sir Robin Jacob recognised that it had been open to Anheuser-Busch to allege adverse effect. Anheuser-Busch had chosen not to do so because it had mistakenly assumed that, as Budvar had not expressly pleaded the honest concurrent use defence, it would be unable to rely upon it subsequently. Sir Robin also recognised that ECJ jurisprudence established that it was wrong to say that confusion was necessarily present in Article 4(1)(a) cases. Sir Robin therefore said that it would be unjust to order a new trial because Anheuser-Busch had failed to put its case at the first trial due a mistake as to the law.

Mr Justice Warren then said that he would have allowed Anheuser-Busch to amend its pleadings and adduce further evidence had Anheuser-Busch demonstrated that it would be able to adduce evidence supporting a claim of adverse effect. Anheuser-Busch had failed to do so despite the inclusion of the honest concurrent use defence in Budvar's grounds of appeal and the ECJ's decision which made it clear that Anheuser-Busch might need to prove adverse effect.

The court's decision helpfully clarifies the ECJ's ruling on the scope of the honest concurrent use defence. Perhaps most important was the court's decision that the defence can be relied upon even where the level of confusion among consumers can be shown to be more than de minimis. While this decision will be welcomed by owners of brands which co-exist with identical earlier trademarks, it is important to remain mindful of the exceptional facts of the case. Cases of honest concurrent use are likely to remain rare. 

Nick Bolter, Edwards Wildman Palmer UK LLP, London